Online lender LendingClub has announced plans to acquire Radius Bancorp for $185 million in cash and stock.
As America’s largest online lending marketplace, LendingClub facilitated more than $12.3 billion in loans last year, with around 50,000 people visiting the site daily. The company explained that despite the savings its customers find on the platform, they still have difficulty managing their cashflow and wind up paying hundreds of dollars in overdraft and monthly fees to their banks.
So it’s not surprising that when customers were surveyed about the possibility of LendingClub offering access to a no-fee/rewards-based bank account, 90 percent said they would consider it, while nearly 40 percent said they would switch. The result is a deal that makes LendingClub the first U.S. FinTech company to acquire a bank. It will also allow it to offer new products, diversify its earnings and cut down its use of institutional funding sources.
“What a bank charter does for LendingClub is it allows us to take what is the leading digital loan provider online and combine it with a leading digital deposit gatherer,” Scott Sanborn, CEO of LendingClub, told CNBC. “It totally changes the earnings profile of this business.”
He added that the deal will help save $40 million a year in bank fees and funding costs, as well as allow the company to earn a spread on loans on its balance sheet.
Boston-based Radius has around $1.4 billion in assets and was named the Best Online Bank of 2020 by Bankrate. It has spent the past decade collaborating with FinTechs in need of services from an FDIC-regulated institution.
The deal will take 12-15 months to close. In the meantime, other FinTech firms are taking a different route by applying to become a bank. Last week, mobile bank Varo Money got FDIC approval for a national bank charter so that it could accept customer deposits. In addition, Square applied for an industrial loan company (ILC) charter last year, withdrew the application, and then re-submitted in December.
And Japanese FinTech Rakuten is reportedly planning to apply for a banking charter in the United States.